Governance
The Exchange Fund is under the control of Hong Kong’s Financial Secretary and may be invested in any securities or other assets he considers appropriate, after consulting the Exchange Fund Advisory Committee (EFAC).

Summary
The Exchange Fund was established in 1935. In April 1993, the Hong Kong Monetary Authority (HKMA) was created after the merger of the Office of the Exchange Fund and the Office of the Commissioner of Banking. The HKMA manages the Exchange Fund. The Exchange Fund acts as a stabilizer and invests primarily in its local exchange, the Hang Seng. All Exchange Fund assets can be used to support the Hong Kong dollar exchange rate. The Exchange Fund uses global external managers to administer about one third of its total assets, including all of its equity portfolios and other specialized assets.

BackgroundThe exchange fund can be broken into three parts:

Portfolio

Description

Backing Portfolio

The purpose of this portfolio is to hold liquid U.S. dollar denominated assets for the purpose of providing full backing for the Monetary Base of Hong Kong as required under the Currency Board arrangements

Investment Portfolio

The Investment Portfolio is invested primarily in the bond and equity markets of the member countries of the Organization for Economic Co-operation and Development to preserve the value and long-term purchasing power of the assets.

Strategic Portfolio

It was established in 2007 to hold shares in Hong Kong Exchanges and Clearing Limited.

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